Tax relief for British theatre (updated)

The budget just announced by the British government provides for significant tax relief for live performing arts. Here are reports from The Stage, The Telegraph, and The Independent. The Stage gives details as follows:

The scheme will mean producers are able to claim up to a 25% tax rebate on 80% of a production’s up-front eligible budget costs ahead of its run.

Touring shows will receive a 25% relief, while other productions will be eligible for a 20% tax credit.

It will benefit both commercial and subsidised producers, because the relief will be claimed either by offsetting it against corporation tax – a levy on the taxable profits of an organisation – or as a cash credit.

The relief will be applied on a per-production basis to 80% of a show’s eligible capital expenditure – which includes all costs required to mount a show, apart from investment required for areas such as marketing, advertising and contingency funds.

A few thoughts.

First, this is akin to the film and television production tax credits North Americans are familiar with; the tax relief is not contingent upon a jury deciding upon the quality of the production. It is not like grant money from an arts council, which can set criteria for awards.

Second, let’s think about tax relief as a policy instrument. What goal is it meant to achieve? We can think of many things we want public subsidy of the arts to generate as outcomes: perhaps larger audiences, perhaps more productions, perhaps more artistic excellence. But what is the goal of *this* policy? There are many possible outcomes. More profits for investors in the sector? Greater financial rewards for the artistic talent?

What worries me about a policy like this is its lack of focus. For a government that seems to be more concerned than most about performance metrics, this tax relief policy is quite vague on the hoped-for outcomes. Film tax credits are noted for increasing the returns to producers without generating the outcome that more people view films, or that films get better in quality (and nobody even pretends that these outcomes are the rationale for the policy).

So, I’m not saying the tax relief is *necessarily* a poorly targeted subsidy. But it would be interesting to know how it translates into the usual goals of public arts policy.

UPDATE: This morning (March 21) Artsjournal.com links to a story from The Guardian, giving it the title “Here’s Why to Fund UK Theatre: Plays Are a Major Export”.

No. The Guardian article is about the success of British theatre internationally. I don’t doubt that success, and that British plays, like many American movies, have international earnings as a necessary condition for profitability. But that does not constitute a reason for subsidy. Simply because some good or service represents a net export is no cause to award it preferential tax treatment (and, as a result, give other industries less preferential tax treatment).

There are all kinds of reasons we might want the public sector to give preferential tax treatment, or direct subsidies, to the arts. We might think there are benefits to society that extend beyond those who attend plays, or we might think a more fair society will ensure those on lower income can attend the arts, or we might think there are spillover benefits to encouraging innovation and excellence in the arts, and there are other reasons as well. But the fact that a country exports a particular genre of art is not one of them.

Michael Rushton

Michael Rushton teaches in the Arts Administration programs at Indiana University in Bloomington. An economist by training, he has published widely on such topics as public funding of the arts, copyright, nonprofit organizations and tax policy, and served as Co-Editor of the Journal of Cultural Economics. At IU he teaches Read More…

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